Kenyan investigators have long been able to identify suspicious crypto transactions. The challenge has been gaining access to the assets themselves. New cryptocurrency regulations in Kenya aim to close that gap.

With court approval, the rules give authorities, including financial crime investigators, the power to seize devices, seed phrases, and hardware wallets that unlock digital assets. That authority allows the government to take control of cryptocurrencies linked to fraud, money laundering, corruption, and terrorism-financing investigations.

Kenya already had laws such as the Proceeds of Crime and Anti-Money Laundering Act and the Anti-Corruption and Economic Crimes Act, which allow investigators to freeze traditional bank accounts and trace suspicious transfers. But a crypto wallet whose private keys are stored offline has been harder to reach through general asset-seizure powers.

The Virtual Asset Service Providers (VASP) Regulations, 2026, gazetted on July 24, establish a freezing and seizure framework for virtual assets within Kenya’s broader asset-seizure regime.

“A licencee served with a seizure order shall grant an authorised officer access to any premises where the virtual asset devices are suspected to be and the authorised officer may seize and detain any physical device, hardware wallet, seed phrase backup or electronic system necessary to access the virtual assets,” the regulations read.

A seed phrase is the 12- or 24-word recovery code that helps a user regain access to crypto assets. Whoever controls it can move the funds, which is why investigators now have explicit legal grounds to seize it.

The regulations are part of Kenya’s wider effort to improve monitoring of money laundering, terrorism financing, and other illicit financial flows as the country works to exit the Financial Action Task Force (FATF) grey list.

In April, Kenyan authorities froze several Binance accounts linked to suspected fraud, money laundering, terrorism financing, and the movement of stolen public funds. Binance told affected users that some restrictions had been imposed at law enforcement’s request.

The new framework gives future freezes a clearer legal basis. Under the regulations, a freezing order is an order by a competent court or lawful authority directing a virtual asset service provider “to prohibit any dealing, transfer, conversion, withdrawal or disposal of a specified virtual asset,” giving investigators room to lock down assets before seizure or forfeiture.

That April operation also exposed the limits of Kenya’s earlier enforcement tools. Centralised exchanges could be pressured to restrict accounts, but self-custodied wallets outside regulated platforms remained more difficult to reach. Investigators could identify the wallet without being able to access the assets inside it.

Volatility is another issue the new rules are designed to address. A token worth millions of shillings when frozen could lose a large share of its value before a prosecution concludes. The regulations now allow authorised officers, with court approval, to convert frozen virtual assets into fiat currency during an investigation to preserve their value.

“The authorised officer may, upon approval of the competent court, convert virtual assets into fiat currency to preserve value,” the regulations read.

Once an order is issued, exchanges and wallet providers must preserve the affected assets, stop withdrawals and transfers, and give investigators access to relevant systems and records. Seized assets must then be moved to a secure digital wallet controlled by the competent authority, creating a formal custody chain for recovered crypto assets.

The regulations apply to any provider operating “in or from Kenya.” A platform is considered to meet that threshold if it actively solicits or targets Kenyan users or earns income from Kenya, even if it does not have a physical office in the country.

Failure to comply with a freezing or seizure order is a criminal offence. Licensed crypto operators that refuse to freeze assets, grant investigators access to premises where the suspected assets could be, or assist with the seizure and transfer of virtual assets can face fines of up to KES 5 million ($38,640), up to five years in prison, or both. Companies can be fined up to KES 8 million ($61,800).

The framework also fits into Kenya’s broader push to align with global anti-money-laundering and counter-terrorism financing standards as it works to exit the FATF grey list. Bringing crypto exchanges, wallet providers, and stablecoin issuers into a licencing and reporting regime supports one of FATF’s core recommendations: improving risk-based AML/CFT supervision by extending oversight to sectors that have historically operated outside the traditional banking system.

Kenya’s crypto market grew largely through peer-to-peer trading with limited regulatory visibility. Licencing exchanges and taxing digital assets is only part of the shift. Investigators can now treat the physical backups behind a wallet as evidence in their own right—searched for, seized, and used to secure the assets behind them—giving enforcement agencies a clearer path from identifying suspicious activity to preserving the underlying value.